Living in a World Economy Questions

Why do countries engage in international trade?

• To obtain goods they cannot produce

• To increase their population

• To adopt new government systems

• To travel more easily

What is the main reason countries tend to concentrate on producing certain kinds of goods and services?

• To create a monopoly

• To specialize based on their resources and capabilities

• To increase the cost of goods

• To reduce the variety of goods available

What does absolute advantage mean in the context of international trade?

• The ability to produce a good at a lower cost than other countries

• The ability to produce a good with higher quality than other countries

• The ability to produce more goods than other countries

• The ability to produce a good with less labor than other countries

What does comparative advantage refer to in international trade?

• The ability to produce a good at a lower opportunity cost than other countries

• The ability to import more goods than other countries

• The ability to export all types of goods

• The ability to produce goods without any trade barriers

What is the term for the cost of the next best alternative use of money, time, or resources when one choice is made over another?

• Trade surplus

• Opportunity cost

• Trade deficit

• Balance of trade

A tax on imported goods is known as what?

• Embargo

• Agreement

• Tariff

• Trade barrier

What does NAFTA stand for?

• National Agreement for Trade and Finance

• North American Free Trade Agreement

• National Association of Free Trade

• North Atlantic Free Trade Association

Which of the following is a definition of a trade barrier?

• A method to balance trade between countries

• A tax on exported goods

• A restriction on international trade

• An agreement to facilitate trade

What is a trade surplus?

• When a country's imports exceed its exports

• When a country's exports exceed its imports

• The total value of a country's exports and imports

• An agreement to reduce trade barriers

What is a trade deficit?

• When a country's exports exceed its imports

• When a country's imports exceed its exports

• The total value of a country's exports and imports

• An agreement to reduce trade barriers